I just tried to register. No problems.
Maybe this is the issue.
If you register and then try to login before email a validation message.
You will get a message that states:
"The email for this account has not yet been verified"
Which is a proper message with your settings.
That is what your friend should have seen.
If he tried to register again with your settings it will reject him. Due to even if he is not a validated user his email address is in the cue as used.
If you did not get notified and he was not in the registration cue then you need to look at it a little closer. Possibly the message went to the spam folder. Or you are having a problem. Such as a bug or file permission issues.
Email can be a fickle thing. So you need to watch it maybe.
If you continue to have issues ,then report it in the bug forum.
